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A Rare Find At The Pawnshop

June 07, 1992

Inside Wall Street

A RARE FIND AT THE PAWNSHOP

Believe it or not, pawnshop operators have started to grab some attention on Wall Street. But investor support is still quite fragile. So when EZCORP, which operates 93 pawnshops, posted lower-than-expected second-quarter results on Apr. 27, the stock tumbled from 17 a share to 14 that day. The stock has stayed weak and is currently at 12 3/4.

At that price, EZCORP is quite attractive, says money manager Tom Maguire of Safeco Asset Management. He argues that in the highly fragmented pawnshop business, there are only two publicly traded companies: EZCORP and the larger Cash America Investments. Maguire prefers EZCORP because it's the faster-growing company.

Indeed, the company has more than doubled the number of stores this year. And fiscal 1992 will show a "189% earnings increase, to $3 million--or 35 cents a share, even with a 72% increase in shares outstanding--on a 110% revenue gain to about $50 million," says Dennis Van Zelfden, an analyst at Rauscher Pierce Refsnes in Dallas. A strong balance sheet comprised of minimal debt and cash of roughly $30 million, or $3 a share, should fund store growth through fiscal 1993, he adds.

Another EZCORP bull, Charles Roden, managing director at Josephthal Lyon & Ross, expects the company will have 185 stores by the end of next year, when he expects earnings of 90 cents to $1 a share. "At the rate the company is expanding, the stock could double in two years," says Roden.GENE G. MARCIAL